Since publishing our iM-Best10 portfolio management system, readers pointed out that the high returns obtained may be distorted by what is known as survivorship bias.  Using an online portfolio simulation platform, we investigated the effect of survivorship bias by running simulations on various stock universes. First, the model was run using the present composition of an index series (survivorship biased simulation), then the same model was rerun using the point-in-time composition of the index series (survivorship free simulation). The results were unexpected;  the iM-Best10, a quantitative stock trading model, using the S&P 1500 stock universe simulated the very high survivorship bias free CAGR of 48.10% against the survivorship biased CAGR of 42.93%.
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